Asian rivals take aim at ASX takeover

Political resistance to the sale of
ASX
Ltd has widened into a challenge to the foreign investment regime amid criticism of the “vague" national interest test the government uses.

The growing domestic concern about Australia being the loser from the deal came as top executives at the Tokyo and Hong Kong markets said the merger could increase competition in the rapidly integrating regional financial market.

Tokyo Stock Exchange chief executive Atsushi Saito warned: “If Japan becomes isolated on the inter­national stage, that is not good. There are many options. There could be a combination of TSE and others on an international basis."

In Canberra, MPs said it was “inevitable" that a parliamentary inquiry would scrutinise Singapore Exchange’s bid because of the risk it posed to the hope of turning Australia into a regional financial hub.

Independent senator
Nick Xenophon
backed an inquiry as well as a bipartisan review of the test applied by the Foreign Investment Review Board to rule on inward investment.

“The
ASX
takeover puts into sharp focus the inadequacy and lack of transparency of the current FIRB rules and the application of a national interest test," Senator Xeno­phon said.

“It’s as hard to grasp as mercury. It has a lack of clarity and I think there needs to be a clearer test."

Others called for a review of the rules and said the ASX takeover was reviving concerns about the national interest that were expressed when Chinalco offered $US19.5 billion for a stake in Rio Tinto two years ago.

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“There may be a case for a parliamentary committee looking at the mandate FIRB has," a Liberal senator said.

A parliamentary committee is pre­paring to discuss the sharemarket merger in the coming weeks and a fuller public inquiry appears likely. “I think it’s inevitable that there will be a parliamentary inquiry into this," Senator Xenophon said.

“How could you not have one when this has such huge implications?"

Officials confirmed that a single senator, or two members of the lower house, could force the deal to a vote on the floor of Parliament by chal­lenging any government reg­ulation to amend the 15 per cent ownership cap on ASX Ltd.

Treasurer
Wayne Swan
said he would decide on the deal based on what was best for Australia’s economic prosperity, rebuffing demands from the Greens to consider Singapore’s human rights record.

Mr Swan did not name human rights as a factor in his deliberations, despite calls from Greens leader
Bob Brown
for the deal to be blocked because of Singapore’s limits on free speech and use of the death penalty.

“When it comes to elements of foreign policy, the government has a very considered approach," Mr Swan said. Asked if human rights would come into the process, he made no mention of the issue and instead said: “The decisions that I take under the act are decisions that maximise the economic prosperity of our nation."

Trade Minister
Craig Emerson
also rejected bringing other factors into the deliberations, and rebuked the Coalition for trying to pre-judge the deal.

“The criterion is whether or not this is in the national interest, and that’s where we should be," he said. “Let’s see if we cannot get too passionate about it . . . before those judgments are made."

Senator Brown criticised the “oligarchs" of Singapore for their use of the death penalty and their limits on free speech, adding that the Gillard government should say there was “nothing doing" on the ASX bid.

The transaction is likely to face its first parliamentary scrutiny within weeks when the Joint Committee on Foreign Affairs holds its customary talks with diplomats including the Singaporean high commissioner.

“It certainly will be a matter of interest to members of the committee," said committee chairman Michael Forshaw, a Labor senator from NSW.

Support for Singaporean in­vestment remains solid within the Parliament, where there were about 50 members of the Singapore friendship group in recent years.

Coalition frontbencher
Barnaby Joyce
warned that the Parliament had a responsibility to question the ASX transaction.

Senator Joyce questioned how the sale of the Australian sharemarket to a Singaporean company, partly owned by the Singapore government, would help turn Australia into a financial services hub.

“A huge hole would be left in the economy of Sydney. I think the people of Sydney will go berko over this one," he said.

“People are going to centralise operations near the people who own the company, and that would be in Singapore."

As the deal reverberated around the region, Hong Kong Stock Exchange chief executive Ronald Arculli said: “I think to say we have nothing to be concerned about would be doing Singapore and Australia a serious injustice. All of us are out there competing."

The TSE’s Mr Saito told The Financial Times: “The consensus [among officials at Asian exchanges before the proposed deal was announced] was that such a thing would be impossible in Asia" due to the differences in culture and sense of values." He said that if the deal were to go ahead, it could result in a loss for the TSE, which is SGX’s second largest shareholder with 4.9 per cent.

“Our shareholdings will be diluted, with our stake falling to about 3.1 per cent," he said. “It’s possible we’ll have a loss of hundreds of millions of yen."

The government has been under pressure to refine the national interest test since it sparked controversy during the surge in Chinese state-owned company investment in the mining industry two years ago.

The government resisted making the Foreign Investment Review Board more transparent but has clarified Australia’s approach to state company investment and sought to better explain its approach to assessing foreign investment.

The regulation to change the ownership cap, known as a disallowable instrument, would have to be tabled in the House of Representatives and the Senate.

It could be challenged at any point in the subsequent 15 sitting days of parliament. In order to challenge it, a Senator would need to sign a notice of motion stating that he or she intended to disallow the regulation. In the House of Representatives the notice would need to be signed by two members.

Once this notice is given, a second period of 15 days commences during which the notice could be called on and debated in the chamber.